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So, Nouriel Roubini was asked this question. If 10- year and 30-year rates rise by 100 basis points, how will that affect the housing market? Could a 30-year rate affect something more important? And he said, well, if inflation is higher and the nominal yield is higher, well, the nominal interest rate refers to the rate before inflation is taken into account.
So you will suffer losses not only on your 60/40 investment, but also on your share of the stock, and mortgage rates will rise, which could lead to a correction and slowdown in the housing market. He then gave an example of what happened just a few weeks ago, in September of this year. Okay. Using that example, bond yields rose because people were worried about inflation and when the Fed would start tapering stimulus.
Yields didn't increase that much, he said, only about 22 basis points. So we have such examples. You know, the Financial Times and CNBC reported that we can see an increase in government bond yields as traders react to " hawkish" signals. A global bond sell-off pushed U.S. Treasury yields to a 3- month high on Monday, September 27, 2021, as investors reacted to the prospect of a possible interest rate hike.
Okay. And then CNBC reported the next day, September 28, that the benchmark 10- year U.S. Treasury yield rose again that Tuesday, reaching its highest level since June 2021, continuing its steady rise. So, given this increase, the S&P index adjusted 5% as a result of this increase in bond yields. The NASDAQ adjusted even more as there were more growth stocks, which are long- dated, interest rate-sensitive assets, and there was also a correction in REITs, which are real estate analogs.
So, certainly, in his opinion, a sharp rise in bond yields will hurt not only fixed income instruments, but also risky assets, including stocks. Yes, stocks are risky assets, as are some segments of the housing market. So, this is definitely a risk for a whole range of asset prices. So, we also had recently, literally yesterday, the 24th or rather the 25th, maybe today the 20th , I think it's the 20th today, September 25th, we heard from Bob Kendall from the Kendall Report YouTube channel; He said that he was not scared of the US debt itself, but that no one would come to the auction.
The auction showed that you usually get coverage of two to three at certain auctions, but if they start to drop below two or one to one, then that would be the scariest event. This could lead to a wild jump or move to 175 and 186 basis points for the 10-year yield. So to understand what these basis points mean, you can calculate the basis points as a percentage by multiplying them by 0.00001.
So we have 175, multiplied by 0.00001 will give you 0.0175. Thus, the decimal and percentage equivalent of 175 basis points would be 0.0175 or 1.75%. So, 186 basis points would be 1.86%. So, in short, that's what he answered in that question. OK. Thank you very much for watching.
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